Oh sure, the budget tabled Tuesday in Ottawa bears the signature of Finance Minister Chrystia Freeland. But we see the shadow of Joe Biden in the document yet entitled “A Canadian plan”.
Canada had no choice but to position itself in the face of the Inflation Reduction Act passed by the United States, which will offer US$369 billion in subsidies over 10 years to revolutionize American industrial policy by focusing on the clean energy.
Ottawa could not let the train pass, so that our companies remained competitive in this green economy of the future. But the bill will be expensive.
The Liberal government comes with an 82.7 billion plan over 11 years, propelled by a battery of tax credits on investments in clean electricity, clean hydrogen or carbon capture.
Ottawa chooses to stimulate investment, rather than production as in the United States, which will have faster effects, but could also be more risky since it will intervene earlier in the process, without knowing if the investments will bear fruit.
There is also the shadow of Jagmeet Singh in this budget. The New Democrat leader agreed to support the minority government in exchange for a commitment to roll out a national dental insurance program, the first phase of which began in 2022.
The Parliamentary Budget Officer has warned that the terms of the hastily put together open the door to abuse. Never mind ! Ottawa is stepping on the accelerator by extending coverage to taxpayers earning less than $90,000 by the end of 2023, two years earlier than planned. But we still don’t know exactly how this will tie in with the program that already exists in Quebec, to avoid people being compensated twice. Misery !
Hounded by Conservative leader Pierre Poilievre on inflation, Ottawa has also planned a measure to counter the rising cost of grocery shopping, by increasing the GST refund for 11 million less well-off Canadians. This targeted aid is a better approach than the inflationary distribution of gifts for all, as Quebec has done.
Ottawa is also tackling various subjects of consumer frustration, although many details are yet to come.
Travelers will be happy to learn that the compensation to be paid by air carriers in the event of flight delays or cancellations will be harmonized with the more advantageous rules of other countries, particularly in Europe. Hallelujah!
Ottawa also wants to establish the right to repair broken objects and impose a universal charger for electronic devices, as the European Union will do in 2024. So much the better! This will avoid the costly waste that empties consumers’ pockets and fills landfills.
It is a pity that Canada is trailing behind Europe when it comes to consumer protection.
Ottawa also wants to clarify the rules of the game in mortgages, while the rise in interest rates is causing unpleasant surprises for many owners. Lenders may have to offer them relief measures, although the terms are yet to be defined.
One thing is certain, all of these measures have the merit of improving the lot of consumers without making an even bigger hole in the State’s coffers.
Because the biggest problem with this budget is that the Liberal government continues to spend happily, accumulating deficit after deficit.
In addition to the pandemic megabill, Ottawa has announced $345 billion in new spending over five years, since 2021, including $43 billion in spending in Tuesday’s budget, the Business Council of Canada calculates.
It’s irresponsible. Especially since Ottawa is always postponing its objectives of cleaning up public finances.
In last November’s budget statement, the government planned to return to balance in 2027-2028, with a surplus of $4.5 billion. Whoops ! With the new spending, this surplus turned into a deficit of 14 billion. And the balanced budget is again gone, like a perpetual mirage.
Even the debt-to-GDP ratio, which served as the Liberals’ fiscal anchor, is starting to climb again. And interest charges on debt will double, from $24.5 billion in 2021-22 to $46 billion in 2024-25.
In short, it’s getting expensive to spend on the credit card.
It is time to set clear targets in a law, as Quebec has been doing for a long time, which has allowed it to put its public finances in order in a remarkable way.
All OECD countries have such fiscal anchors enshrined in law, according to the CD Howe Institute. All except South Korea, Turkey… and Canada.
In Ottawa, it is time to drop anchor to avoid the drift of our public finances.